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House Price Crash Forum

We Are Facing Another Global Financial Crisis Of Epic Proportions


suntory

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HOLA441

Why don't you tell your boss that a massive crash is on its way. Sit back 6 months and be get promoted in kind.

He's retiring and moving North for cheaper housing, one shuffle up the greasy pole already arranged for me.

I gave up talking about house prices to people I know, it never goes well. Us crazies on here seem to had our bullsh*t filters removed.

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This is what a $700 billion bond-market bubble looks like

Two of the most important central-bank governors, Japan's Haruhiko Kuroda and the eurozone's Mario Draghi, have each said there's "no limit" to what they'll do to loosen monetary policy this year. This is because they have set inflation targets they just can't hit at the moment. Not only that, but their economies are dangerously close to deflation — where prices fall rather than rise, sparking a recession as corporate profits decline. To stimulate their economies, and get fresh credit circulating, they have bought bonds and lowered interest rates. Central bankers' easing policies, along with bank capital and liquidity rules that make holding bonds more attractive, have inflated the bond market by a huge $700 billion (£481 billion) since the 2008 financial crisis, according to Deutsche Bank. That increase has come at the expense of the stock market.

Beyond any negative signal further monetary easing sends on underlying growth prospects, historically falling bond yields with the attendant capital gains on bonds have seen inflows rotate into bonds at the expense of equities. The correlation between equities and bond yields remains strongly positive. Notably, the best period of inflows for equities was after the taper announcement in 2013 when bond yields rose sharply.

bonds.png

So, money that would have flowed into the stock market has been sucked into the bond market instead.

stocks.png

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^


Two of the most important central-bank governors, Japan's Haruhiko Kuroda and the eurozone's Mario Draghi, have each said there's "no limit" to what they'll do to loosen monetary policy this year. This is because they have set inflation targets they just can't hit at the moment.

Maybe they could get those few people who do benefit from the "stimulus" to go out and buy the entire stock of supermarkets etc. Then they might get a bit of price "inflation". That would be a success for the economy wouldn't it.

Edited by billybong
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